Gold Prices Squeeze Out Gains

A weaker U.S. currency makes gold, a dollar-backed commodity, less expensive to buy in other currencies. Although gold recently has been bucking its inverse correlation to the U.S. dollar, the fact that the currency sunk to a five-week low against the euro could push more investors into "cheaper" gold.

Some analysts, however, are more skeptical. Gold broke through its critical support level of $1,225 an ounce Thursday, which has some wondering if gold will continue lower in the summer months, typically a weak buying season for physical gold.

The $1,225 level "was, in fact, a very important so-called reaction low which needed to be maintained ," says Jon Nadler, senior analyst at Kitco.com. "We could be looking into the $1,175, $1,180 area as a next target and the tug of war will continue between the longs and the shorts ... I think you have a combination of quest for cash as the new quarter begins and asset allocators look for alternatives to what they've been doing up until now."

Silver prices closed 6 cents softer at $17.70, while copper settled 3 cents higher at $2.91.

Gold mining stocks, a more risky but more profitable way to invest in gold, were rallying. Freeport McMoRan Copper & Gold(FCX) was rising 0.45% to $58.44, while Gold Fields(GFI) was adding 1.25% to $12.95. Other gold stocks New Gold(NGD) and Kinross Gold(KGC) were trading at $6.07 and $16.37, respectively.

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--(symbol) by Alix Steel in .

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